Nonprofit Finance Fund. Demystifying Nonprofit Financials and Full Cost Funding. March Presented by Alice Antonelli Director

Transcription

1 Nonprofit Finance Fund Demystifying Nonprofit Financials and Full Cost Funding Presented by Alice Antonelli Director March 2017 nonprofitfinancefund.org 2017 Nonprofit Finance Fund

2 Agenda Introductions Statement of Activity The full cost of running a nonprofit organization Statement of Financial Position Wrap up nonprofitfinancefund.org 2017 Nonprofit Finance Fund 1

3 Nonprofit Finance Fund (NFF) Where Money Meets Mission NFF envisions a world where capital and expertise come together to create a more just and vibrant society We unlock the potential of mission-driven organizations through NFF s Values Tailored investments Strategic advice Accessible insights Generosity of Spirit Responsive -ness Leading By Doing Rigor Without Attitude Guided by our Core Values nff.org 2017 Nonprofit Finance Fund 2

4 Who s in the Room? Please Share: Your name Your organization and role What brought you here today? One thing you would like to learn? nff.org 2017 Nonprofit Finance Fund 3

5 Today s Objectives This session will demystify nonprofit financial statements and provide a practical framework for assessing the health and sustainability of a nonprofit's underlying business model and capitalization Today s Goals: Review the basics of nonprofit financial statements Create common language and shared understanding of the full cost of running a nonprofit organization Discuss 3 key indicators to watch and assess nonprofitfinancefund.org 2017 Nonprofit Finance Fund 4

6 How Do We Define Financial Health? How Is It Created? Comprehensive Financial Health Consistent surpluses Business Model Capital Structure Reinvestment into the business model nonprofitfinancefund.org 2017 Nonprofit Finance Fund 5

7 Buying a Cup of Coffee Illustration of For-Profit Money Rules In the for-profit world, 1. Customer buys the product 2. Price covers the full cost of doing business 3. Overhead & profits are seen as necessary and regular part of the business 4. Management has discretion of how they spend the organization s money 5. There are clear metrics to assess success of the organization Source: Matt Milletto, Vice President of the American Barista & Coffee School nonprofitfinancefund.org 2017 Nonprofit Finance Fund 6

8 Money Rules: For-Profit vs Nonprofit Business Quiz True or False? The customer buys the product Price is determined by cost, customer, competition For- Profit True True Nonprofit False False Management has discretion of how they spend the organization s money True False Overhead is understood as a necessary cost of doing business True False There are clear metrics to assess success of the organization True False Profits / surpluses are seen as important and necessary for long term viability True False nonprofitfinancefund.org 2017 Nonprofit Finance Fund 7

9 Two Financial Bottom Lines Income Statement: Surplus/Deficit Reflects the annual results of a grantee s core business Balance Sheet: Net Assets Provides a picture of overall financial health Income Statement Balance Sheet Revenue - Expenses Surplus/ Deficit A surplus builds net assets; A deficit depletes net assets Assets - Liabilities Net Assets nonprofitfinancefund.org 2017 Nonprofit Finance Fund 8

10 Capital Structure Business Model Questions to Guide Financial Analysis 1. Profitability: Are operating expenses covered? Are surpluses sufficient to support long-term full costs needs? 2. Revenue Dynamics: Where does the money come from? Have revenue sources changed over time, and if so, what might that mean? Do revenue streams seem reliable or volatile? 3. Expense Dynamics: How is money being spent? Are expenses predictable? Are expenses being managed to respond to revenue shifts from year to year? Is there flexibility in expenses that allow management to respond to unexpected revenue shifts? 4. Health of Balance Sheet: Are the size, nature and distribution of assets, net assets and liabilities appropriate to support the organization s business and programs over the long term? Is there evidence of investment into fixed assets? Is debt being managed appropriately? Are there sufficient reserves for the organization s needs? 5. Liquidity: Is there enough cash on hand to operate smoothly? Is some cash restricted or spoken for? How liquid are net assets? Is liquidity adequate, given the organization s business model, market, balance sheet needs, future plans? nonprofitfinancefund.org 2017 Nonprofit Finance Fund 9

11 Three Important Indicators of Financial Health * Net Operating Income How the organization can build sustainability Unrestricted operating revenue less operating expenses Net Worth The ability to address risk take advantage of opportunity Total assets less liabilities Liquidity The ability to manage day to day operations Cash on hand, current assets less current liabilities, liquid unrestricted net assets *Yet they may not be easily identifiable on nonprofit financial statements nonprofitfinancefund.org 2017 Nonprofit Finance Fund 10

12 Sample Statement of Activities ABC Center Statement of Activities Year ended June 30, 2017 ($ in thousands) Unrestricted Operating Activity Temporarily Restricted Permentantly Restricted Total Revenue, Gains and Other Support Investment income Program fees & tuition Rental income Individuals Foundations & corporations Government Special events, net Total revenue (before net assets released ,016 Net assets released from restriction 749 (749) - - Total revenue 1,707 (691) - 1,016 Operating Expenses Personnel Professional fees Occupancy Interest Support Total Expenses 1, ,262 Change in Net Assets 445 (691) - (246) nonprofitfinancefund.org 2017 Nonprofit Finance Fund 11

13 Revenue Flows Into Three Buckets Unrestricted Revenue Temporarily Restricted Revenue Permanently Restricted Revenue Earned Contributed Purpose Timing Endowment Unrestricted Net Assets Temporarily Restricted Net Assets Permanently Restricted Net Assets nonprofitfinancefund.org 2017 Nonprofit Finance Fund 12

14 How Revenue Also Flows Among the Buckets nonprofitfinancefund.org 2017 Nonprofit Finance Fund 13

15 How Were ABC Center s Operating Results? ABC Center Statement of Activities Year ended June 30, 2017 ($ in thousands) Unrestricted Operating Activity Temporarily Restricted Permentantly Restricted Total Revenue, Gains and Other Support Investment income Program fees & tuition Rental income Individuals Foundations & corporations Government Special events, net Total revenue (before net assets released ,016 Net assets released from restriction 749 (749) - - Total revenue 1,707 (691) - 1,016 Operating Expenses Personnel Professional fees Occupancy Interest Support Total Expenses 1, ,262 Change in Net Assets 445 (691) - (246) nonprofitfinancefund.org 2017 Nonprofit Finance Fund 14

16 Another Look At ABC Center s Operating Results ABC Center Statement of Activities (Revised) Years ended June 30, 2010 ($ in thousands) Unrestricted Operating Activity Temp. Restricted Perm. Restricted Total Operating Revenue Earned Investment Income Program Fees & Tuition Rental Income Government Earned Earned Operating Revenue Contributed Individual Foundations & Corporations Government Special Events, net Net Assets Released from Restrictions 152 (152) - - Contributed Operating Revenue 653 (94) Total Revenue 1,110 (94) - 1,016 Determine true Operating Surplus / Deficit Non-operating revenue segregated and placed below the operating line Operating Expenses Personnel Professional Fees Occupancy Support Total Expenses 1, ,169 Surplus/Deficit Before Depreciation (59) - - (59) Depreciation Expense Surplus/Deficit After Depreciation (152) - - (152) Non-Operating Activities Unrestricted Non-Op Revenue 597 (597) - - (e.g. capital campaign receipts/releases) Net gain (loss) on sale of assets Change in Net Assets 445 (691) - (246) nonprofitfinancefund.org 2017 Nonprofit Finance Fund 15

17 Non-Operating Dollars Can Hide True Operating Performance 1,800 1,600 1,400 1,200 1, Unrestricted Revenue & Expenses (including non-operating) ($ in thousands) 1,800 1,600 1,400 1,200 1, Operating Revenue & Expenses ($ in thousands) Revenue, including non-operating Expenses (before depreciation) With revenue for capital projects below the line, this organization is not breaking even! nonprofitfinancefund.org 2017 Nonprofit Finance Fund 16

18 Your Turn: Understanding Operating Performance It s your turn. How would you interpret the Statement of Activities for this organization? How do you think the organization is doing? Are they generating surpluses? What do the changes between 2016 and 2017 tell us? Does anything unusual stand out? What don t we know? What additional questions about operations do you have for Sunrise Childcare? nonprofitfinancefund.org 2017 Nonprofit Finance Fund 17

19 Your Turn: How was Sunrise Childcare s Operating Performance? SUNRISE CHILDCARE Operating Activity 2016 Temp 2017 Temp (in thousands) Unrestricted Restricted Total Unrestricted Restricted Total Revenue, Gains and Support Earned Program Fees Investment income Other (including in kind) Contributed Individuals Grants In-kind Contributions Released from Restriction 135 (135) - 74 (74) - Total Revenue, Gains and Support 383 (28) Operating Expenses Personnel Professional Fees Occupancy Program & Admin Costs Interest Total Operating Expenses Change in net assets 4 (28) (24) (61) nonprofitfinancefund.org 2017 Nonprofit Finance Fund 18

20 Understanding and Defining Full Cost Why does Full Cost Matter? Change Capital Total Expenses Fixed Asset Additions Working Capital Debt Principal Repayment Reserves nonprofitfinancefund.org 2017 Nonprofit Finance Fund 19

21 Operating Expenses Expenses Found on the income statement Include: Operating and non-operating expenses Depreciation Ongoing cost of impact measurement and some upfront costs of impact measurement Direct program expenses Indirect / overhead expenses Unfunded expenses Total Expenses Total Expenses are NOT Any purchase that is capitalized Repayment of debt nonprofitfinancefund.org 2017 Nonprofit Finance Fund 20

22 Defining Unfunded Expenses Unfunded Expenses are expenses that are not currently incurred, but, if covered, would allow the organization to work at their current level in a way that is reasonable and fair. Sweat equity overworking and underpaying staff is the most common example, such as: The gap between current wages and fair wages for the exact same amount of work The cost to hire a 20hr/week assistant that would allow the ED to reduce her time from 60hr/week to 40hr/week What are other examples? Unfunded expenses are NOT Expenses to expand or do more nonprofitfinancefund.org 2017 Nonprofit Finance Fund 21

23 What is Working Capital? Working Capital Dollars to cover predictable timing of cash ebbs and flows Dollars to continue business operations if receivables are late or bills must be paid early Needed by all organizations Easily accessible to management (i.e. in the checking account, not restricted or strictly designated) Connected to cash flow planning/projections Working Capital Working Capital is NOT Dollars to cover lost revenue, unplanned expenses, or deficits nonprofitfinancefund.org 2017 Nonprofit Finance Fund 22

24 What About Reserves? Reserves Dollars used and eventually replenished Often board designated Example of intended uses Operating reserve to protect the organization from risk by covering short-term deficits Facilities reserve to maintain building and equipment, pay for repairs and/or replacement R&D reserve to allow for trial and error Investment reserve to generate revenue Reserves nonprofitfinancefund.org 2017 Nonprofit Finance Fund 23

25 Debt Principal Repayment Debt Principal Repayment Dollars to pay down debt Debt can be Line of credit Bridge loan Mortgage Loans from board members Other forms of borrowing Debt can be a valuable financing tool, but there must be a plan to repay it Repayment is commonly financed through yearto-year surpluses Debt Principal Repayment nonprofitfinancefund.org 2017 Nonprofit Finance Fund 24

26 Fixed Asset Additions Fixed Asset Additions Purchase of new equipment, buildings, furniture, land, leaseholder improvements, etc. Fixed Asset Additions are NOT Replacement or simple maintenance of existing fixed assets Save for replacement in reserves Small equipment purchases that won t be depreciated Small purchases are expensed Fixed Asset Additions nonprofitfinancefund.org 2017 Nonprofit Finance Fund 25

27 What is Change Capital? Change Capital Periodic reinvestment into the organization to change its business model Covers up-front costs of change and deficits until new business model revenue exceeds new business model expenses Should include funds for the launch/scale of revenue-generating activities that will sustain organization when change capital is spent Typically large, flexible, multi-year funding from an external source Change Capital Change Capital is NOT Self-funded, organic growth nonprofitfinancefund.org 2017 Nonprofit Finance Fund 26

28 Applying Full Cost in Context Full cost needs are unique to each organization Full cost needs change over time Invitation to stop and ask: Which full cost slices apply to my grantee? In what way? Which slices do they have covered? Which slices are priority? Change Capital Fixed Asset Additions Debt Principal Repayment Total Expenses Reserves Working Capital Needed by some, some of the time Needed by all, all of the time nonprofitfinancefund.org 2017 Nonprofit Finance Fund 27

29 Prioritizing Full Cost Needs First Priority: Expenses Pays for year-to-year mission delivery Sector is generally stuck discussing expenses: Concerns about overhead have limited ability to pay for necessary day-to-day expenses Wages and benefits are unsustainably low Total Expenses nonprofitfinancefund.org 2017 Nonprofit Finance Fund 28

30 Applying Full Cost in Context After expenses, remaining full costs represent balance sheet needs or capitalization needs Capitalization is the alignment of resources to an organization s short-term and long-term needs An organization can be wellcapitalized, under-capitalized, or miss-capitalized Change Capital Fixed Asset Additions Debt Principal Repayment Total Expenses Reserves Working Capital Needed by some, some of the time Needed by all, all of the time nonprofitfinancefund.org 2017 Nonprofit Finance Fund 29

31 Prioritizing Full Cost Needs Capitalization has a hierarchy of need Liquidity Does the organization have adequate cash to meet its month-to-month operating needs? Adaptability Does the organization have flexible funds that allow for adjustments, growth, or change? Durability Does the organization have access to funds to address a variety of future needs to deliver mission over the long-term? nonprofitfinancefund.org 2017 Nonprofit Finance Fund 30

32 How do Full Cost Slices Meet Capitalization Needs? Change Capital Fixed Asset Additions Debt Principal Repayment Line of Credit Board loan for cash flow Software for impact measurement Building Mortgage Reserves Working Capital Operating Reserve R&D Reserve Facility Reserve Investment Reserve Liquidity Adaptability Durability nonprofitfinancefund.org 2017 Nonprofit Finance Fund 31

33 Calculating Full Cost Needs Loan agreement Vendor quotes Cash flow projection Multi-year projections of redesigned Risk analysis business model Estimates Scenario planning System replacement plan Fixed Asset Additions Change Capital Debt Principal Repayment Working Capital Reserves Easiest to Calculate Most objective Hardest to Calculate Least objective nonprofitfinancefund.org 2017 Nonprofit Finance Fund 32

34 BREAK nonprofitfinancefund.org 2017 Nonprofit Finance Fund 33

35 Three Important Indicators of Financial Health (cont d) Net Operating Income How the organization can build sustainability Unrestricted operating revenue less operating expenses Net Worth The ability to address risk take advantage of opportunity Total assets less liabilities Liquidity The ability to manage day to day operations Cash on hand, current assets less current liabilities, liquid unrestricted net assets nonprofitfinancefund.org 2017 Nonprofit Finance Fund 34

36 Review: The Two Financial Statements are Connected Income Statement: Surplus/Deficit Reflects the annual results of a grantee s core business Balance Sheet: Net Assets Provides a picture of overall financial health Income Statement Balance Sheet Revenue - Expenses Surplus/ Deficit A surplus builds net assets; A deficit depletes net assets Assets - Liabilities Net Assets nonprofitfinancefund.org 2017 Nonprofit Finance Fund 35

37 Financial Position Can Tell the Organization s Story Evolution of Financial Position Statement of Financial Position FYE 06/30/16 ($ in thousands) Assets Cash 296 Payables 131 Receivables 612 Debt 0 Prepaid Exp 22 Other 29 P&E (Net) 256 Long-term receivables 39 Total Assets $1,253 Liabilities Total Liabilities 131 Net Assets Unrestricte 325 Temp Restr 797 Perm Restr 0 Total Net Assets 1,122 Total Liab/Net Assets $1,253 From 7/1/16 to 6/30/17 NPO engages in activities and operations Statement of Financial Position FYE 06/30/17 ($ in thousands) Assets Liabilities Cash 191 Payables 57 Receivables 55 Debt 114 Prepaid Exp 41 Other P&E (Net) 760 Long-Term receivables Total Assets $1,047 Total Liabilities 171 Net Assets Unrestricte 771 Temp Restr 105 Perm Restr 0 Total Net Assets 876 Total Liab/Net Assets $1,047 nonprofitfinancefund.org 2017 Nonprofit Finance Fund 36

38 What Decision Affected the Balance Sheet? nonprofitfinancefund.org 2017 Nonprofit Finance Fund 37

39 Your Turn: Determine the Strength of the Balance Sheet How would you interpret the Balance Sheet for this organization? Based on this data, how do you think Sunrise is doing? What changed? What might these changes suggest? What does the total net assets tell us? Does anything unusual stand out? What questions would you have for the leadership of Sunrise? nonprofitfinancefund.org 2017 Nonprofit Finance Fund 38

40 Your Turn: Determine the Strength of the Balance Sheet SUNRISE CHILDCARE Statement of Financial Position Assets Liabilities Cash Accts payable/accrued exp Investments 10 9 Accrued salaries Grants receivable, current Line of credit payable 30 - Grants receivable, long-term Other assets Total Liabilities Property & equipment (net) Net Assets Unrestricted net assets Temporarily restricted net assets Total Net Assets Total Assets Total Liabilities & Net Assets nonprofitfinancefund.org 2017 Nonprofit Finance Fund 39

41 Calculating Liquidity Measures Liquidity represents an organization s safety-net, its ability to navigate risk and pursue opportunities. Cash: Indicates ability to cover short-term obligations and day-to-day expenses LUNA: Indicates portion of net assets (what an organization owns after obligations) that are truly liquid and available for use Months of Cash = Total Cash (Total Expenses / 12) Months of Liquid Unrestricted Net Assets (LUNA) = Total Unrestricted Net Assets (P&E P&E Debt) (Total Expenses / 12) nonprofitfinancefund.org 2017 Nonprofit Finance Fund 40

42 Where Are Liquid Unrestricted Net Assets? ABC Center Statement of Financial Position ($ in thousands) 06/30/16 06/30/17 Assets Current Cash and Equivalents Grants & Pledges Receivable Prepaid Expenses Other Current Assets 29 Total Current Assets Long-Term Grants & Pledges 39 Net Fixed Assets (P&E) Total Long-Term Assets Total Assets 1,253 1,047 06/30/16 06/30/17 Liabilities Current Accounts Payable Other Current Liabilities 5 Total Current Liabilities Long-Term Long-Term Debt 114 Total Long-Term Liabilities 114 Total Liabilities Net Assets Unrestricted Undesignated Unrestr. - P&E Total Unrestr. Net Assets Temp. Restricted Net Assets Perm. Restricted Net Assets Total Net Assets 1, Total Liab. & Net Assets 1,253 1,047 nonprofitfinancefund.org 2017 Nonprofit Finance Fund 41

43 Where Do We Find Liquid Unrestricted Net Assets? Assets Balance Sheet Temporarily Unrestricted Restricted Contribution Contribution Liabilities s s Earned Revenue Net Assets Unrestricted Temporarily Liquid Net Restricted Assets Board Reserves Net Assets P&E Temporarily Restricted Net Assets Permanently Restricted Net Assets Temporarily Restricted Net Assets Permanently Restricted Released Ice: Receivables Water: Unrestricted Cash Rocks: P&E Water Bottle: Board Designated Reserve Operating and Non-operating Expenses nonprofitfinancefund.org 2017 Nonprofit Finance Fund 42

44 Months of Liquidity: A Guide Months of Expenses Covered by Liquidity Operating Situation 0 Crisis Scrambling for cash, delaying payment to vendors, overdrawing checking account. Less than 3 months Cash is tight Relying on line of credit, delaying payment to vendors. 3-6 months Room to breathe Can do some long-term thinking. Little room for rainy days. 6+ months Handles more risk Able to withstand increasingly acute shocks such as large facility repairs, funding cuts and possibly recessions. nonprofitfinancefund.org 2013 Nonprofit Finance Fund 43

45 Your Turn: Calculating Liquidity SUNRISE CHILDCARE Statement of Financial Position Assets Liabilities Cash Accts payable/accrued exp Investments 10 9 Accrued salaries Grants receivable, current Line of credit payable 30 - Grants receivable, long-term Other assets Total Liabilities Property & equipment (net) Net Assets Unrestricted net assets Temporarily restricted net assets Total Net Assets Total Assets Total Liabilities & Net Assets Operating Activity Revenue, Gains and Support Operating Expenses Monthly Operating Expenses Months of Cash Months of Liquid Net Assets nonprofitfinancefund.org 2017 Nonprofit Finance Fund 44

46 Balance Sheet Income Statement Wrap up: Addressing the Red Flags Operating deficits that appear ongoing, and/or are large in relation to the operating budget Revenue swings that are significant from year to year Significant liabilities in relation to assets, and/or are not temporary/seasonal in nature Unrestricted net assets that are negative and/or in steady decline Liquidity that is low and/or declining Investments or real estate that has been sold to generate cash Line of credit maxed out during and/or at the end of the year Credit card Debt nonprofitfinancefund.org 2017 Nonprofit Finance Fund 45

47 Wrap up: A Financial Health Checklist Unrestricted operating results are consistently positive (surpluses!) Full costs are regularly covered by reliable revenue Reinvestment in fixed assets to offset depreciation Evidence of ability to manage debt Liquidity is sufficient to withstand risk and pursue new opportunities nonprofitfinancefund.org 2017 Nonprofit Finance Fund 46

48 Today s Objectives Did we: Demystify nonprofit financial statements? Provide a practical framework for assessing the health and sustainability of a nonprofit's underlying business model and capitalization? Today s Goals: Review the basics of nonprofit financial statements Create common language and shared understanding of the full cost of running a nonprofit organization Discuss 3 key indicators to watch and assess nonprofitfinancefund.org 2017 Nonprofit Finance Fund 47

49 Appendix nonprofitfinancefund.org 2013 Nonprofit Finance Fund 48

50 Glossary of Finance Terms Income Statement / Statement of Activities Business Model A business model captures how an organization makes and spends money in service of its mission. It is comprised of revenues, expenses, and service (i.e. mission and impact). Revenue Money received for goods and services, donations from individuals, foundations and corporations, support and contract payments from government agencies, and income from fundraising activities, and investments. Expenses Represent the outflow of money to pay for an item or service, including payments made to employees and other contracted parties, occupancy costs, administrative and program costs, and certain noncash expenses. Mission fulfillment over the long-term depends on covering the direct costs of delivering programs and the indirect costs that support effective program delivery. Depreciation A non-cash expense associated with reducing a fixed asset s book value due to general wear and tear over its defined accounting or useful life. Depreciation can be thought of as an approximation of the amount needed to replace fixed assets. Balance Sheet / Statement of Financial Position Capitalization The alignment of financial resources (capital structure) to support your mission. Capitalization is found on the balance sheet and influenced by the organization's business model. Capital Structure The distribution, nature and magnitude of an organization s assets, liabilities and net assets. Assets An item of current or future economic benefit to an organization. Examples include: cash, shortterm investments, accounts receivable, property, equipment, and long-term investments. Liabilities An obligation that legally binds an organization to settle a debt or arises out of business operations, i.e. obligations owed or claims against its assets. Examples include: accounts payable, accrued salaries and benefits, accrued payroll taxes, deferred revenue, lines of credit, and long-term debt. Liquidity A measure of how much cash and near cash (assets readily convertible to cash such as marketable securities) an organization has available, usually measured as the amount of assets in cash or cash equivalents. Can include the unused amount from lines of credit that are available to the borrower. A less conservative measure would be working capital: current assets less current liabilities. Net Assets The difference between total assets and total liabilities, effectively net worth. Net assets are categorized as unrestricted, temporarily restricted, or permanently restricted. nonprofitfinancefund.org 2013 Nonprofit Finance Fund 49

51 Resources Financial Risk Management: A Guide for Nonprofit Executives; by Melanie Lockwood Herman Nonprofit Sustainability: Making Strategic Decisions for Financial Viability; by Jeanne Bell, Jan Masaoka and Steve Zimmerman ProBono Partnership BoardSource Greater Washington Society of CPAs Independent Sector Nonprofit Assistance Fund Financial Leadership for Nonprofit Executives; by Jeanne Bell Peters and Elizabeth Schaffer (CompassPoint-Fieldstone) GuideStar The Four Horseman of the Apocalypse; by Clara Miller 20 Questions Directors of Not-for-Profit Organizations Should Ask About Fiduciary Duty Financial Literacy Financial Management Resources Financial Policy Guidelines The Case to Cover Full Cost, by Claire Knowlton nonprofitfinancefund.org 2013 Nonprofit Finance Fund 50

52 Financial Tools Mandatory Mandatory For Many Necessary for All IRS Form 990 Public document Shows financial activity, assets and liabilities, and governance details of the nonprofit Audits Audits required for budgets over a certain size. Third party presentation of financial activities and resources. Reviews or compilations optional for smaller orgs. Internal Financial Statements Budgets Organizational Programmatic Budget vs. Actual Monthly cash flow projections nonprofitfinancefund.org 2013 Nonprofit Finance Fund 51

53 Understanding Your Grantee s Income Statement INCOME STATEMENT REVENUE Earned Program fees Government earned Contributed Private Sources Government Grants EXPENSES Personnel Professional fees Occupancy Program Costs Admin Costs Other Surplus/Deficit Revenue Dynamics: Where did the organization s money come from? Are revenue streams reliable or at risk? Is seasonality a factor? Expense Dynamics: How did the organization spend its money? Are expenses predictable? Is management responsive to operating changes and prepared to make difficult decisions? Profitability & Savings: Were costs covered? Was the organization able to generate savings? Address longer-term balance sheet needs? nonprofitfinancefund.org 2017 Nonprofit Finance Fund 52

54 Understanding Your Grantee s Balance Sheet ASSETS Does the organization have access to appropriate resources? BALANCE SHEET LIABILITIES Does the organization owe more than it owns? Cash - How much? How liquid? How much is available and not restricted? Receivables - Slow to collect? At risk? Investments - How much? Restricted? Property & Equipment Properly maintained? Any deferred maintenance? Payables, Debt - How is cash flow managed? Is debt used appropriately? NET ASSETS Unrestricted Net Assets How much is liquid and not tied up in fixed assets? Temporarily Restricted Net Assets Do they support core programs? Reserves Does the organization have them? Are they suitable to their needs? nonprofitfinancefund.org 2017 Nonprofit Finance Fund 53

55 NFF: How Do We Help the Sector? Financing Loans and Lines of Credit New Markets Tax Credits Program-Related Investment Services Financial Consulting Situation Analysis & NBAs Program Profitability Modeling Scenario Planning Financial Reporting Assistance Strategic Collaboration Planning Long-Term Facility Management Systems Replacement Plans Building For the Future Facilities Planning Workshop Clinics and Workshops Thought Leadership & Partnership Nonprofit advocacy Studies of the nonprofit economy NFF Capital Partners nonprofitfinancefund.org 2017 Nonprofit Finance Fund 54

56 Thank You! To Stay Connected Learn More Twitter Facebook Our Blog Sign Up RSS nonprofitfinancefund.org twitter.com/nff_news facebook.com/nonprofitfinancefund philanthropy.com/blogs/money-and-mission nonprofitfinancefund.org/sign-up nonprofitfinancefund.org/news/feed Get in Touch! Alice Antonelli, Director x204 nonprofitfinancefund.org 2017 Nonprofit Finance Fund 55